Managing a Global Workforce Managing a Global Workforce Challenges and Opportunities in International Human Resource Management Charles M. Vance Yongsun Paik M.E.Sharpe Armonk, New York London, England Copyright © 2006 by M.E. Sharpe, Inc. All rights reserved. No part of this book may be reproduced in any form without written permission from the publisher, M.E. Sharpe, Inc., 80 Business Park Drive, Armonk, New York 10504. Library of Congress Cataloging-in-Publication Data Vance, Charles M., 1952– Managing a global workforce : challenges and opportunities in international human resource management / by Charles M. Vance and Yongsun Paik. p. cm. Includes bibliographical references and index. ISBN-13 978-0-7656-1069-0 (cloth : alk. paper) ISBN-10 0-7656-1069-8 (cloth : alk. paper) 1. International business enterprises—Personnel management. 2. Personnel management. I. Paik, Yongsun, 1956– II. Title. HF5549.5.E45V46 2006 658.3—dc22 2006005775 Printed in the United States of America The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI Z 39.48-1984. ~ BM (c)10987654321 INTRODUCTION AND OVERVIEW v To our dear wives and precious children: the global source of our support and inspiration. CONTENTS vii Contents Foreword xi Preface xiii 1. INTRODUCTION AND OVERVIEW Attracting Factory Workers in China 3 Introduction 4 Global Market Context 5 Key Perspectives in Global Workforce Management 25 Book Overview 30 Summary 31 Questions for Opening Scenario Analysis 32 Case 1.1. The United Nations of Bananas 32 Case 1.2. MNC Collaboration in Social Responsibility 34 Recommended Website Resources 35 2. CULTURAL FOUNDATIONS OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT International Merger Misery at DaimlerChrysler 36 Introduction 37 Understanding Culture 37 Major Models of National Culture 39 Cultural Convergence versus Divergence 50 Final Caveats on Culture and Global Workforce Management 54 Summary 56 Questions for Opening Scenario Analysis 57 Case 2.1. Cross-Cultural Assessment over a Cup of Coffee 57 Case 2.2. Culture Conflict South of the Border, Down Mexico Way 58 Recommended Website Resources 59 vii viii CONTENTS 3. CHANGES AND CHALLENGES IN THE GLOBAL LABOR MARKET Vietnamese Vendors in Prague 61 Introduction 62 Globalization 62 Technological Advancements 63 Changes in Labor Force Demographics and Migration 65 Emergence of the Contingent Workforce 73 Offshore Sourcing 77 Global Workforce Management Challenges 79 Summary 80 Questions for Opening Scenario Analysis 80 Case 3.1. Free Movement of Labor Across National Borders 80 Case 3.2. Europe: The New Destination for Latino Workers 82 Recommended Website Resources 84 4. THE KEY ROLE OF INTERNATIONAL HRM IN SUCCESSFUL MNC STRATEGY Is Accenture’s Global Face Really a Facade? 85 Introduction 86 Knowledge Transfer 86 Global Leadership Training and Development 87 Strategic Control Needs 88 Competitive Strategies of Multinational Corporations 89 Structuring for Optimal Global Performance 93 Linking Human Resource Management Practices to Competitive Strategy and Organizational Structure 95 Paradigm Shift of International Human Resource Management from Contingency Model to Process Development 98 Summary 101 Questions for Opening Scenario Analysis 102 Case 4.1. Lenovo’s Purchase of International Business Machine (IBM) PC Division 102 Case 4.2. Foreign Buyouts Heighten Tensions in Germany 104 Recommended Website Resources 105 5. GLOBAL HUMAN RESOURCE PLANNING “Who Are Our Employees, Anyway?” 106 Introduction 107 From Strategy to Decisions about Work Demand and Labor Supply 108 External Environmental Scanning 109 Job Design for Meeting Global Strategy Work Demand 113 Sources of Global Labor Supply for Meeting Work Demand 122 CONTENTS ix HR Planning for the Long-Term 132 Summary 135 Questions for Opening Scenario Analysis 136 Case 5.1. HR Planning for Executive-Level Gender Diversity 136 Case 5.2. A Google Search—For Talent 137 Recommended Website Resources 138 6. GLOBAL STAFFING Global Staffing at the Royal Dutch/Shell Group 139 Introduction 140 General Factors Affecting Global Staffing 141 Global Recruitment of Human Resources 155 Global Selection of Human Resources 162 Summary 168 Questions for Opening Scenario Analysis 169 Case 6.1. MNC Staffing Practices and Local Antidiscrimination Laws 169 Case 6.2. Local Staffing for Global Business Outsourcing Success 171 Recommended Website Resources 172 7. GLOBAL WORKFORCE TRAINING AND DEVELOPMENT Motorola University 174 Introduction 175 Strategic Role of Training and Development in the Global Marketplace 176 Fundamental Concepts and Principles for Guiding Global Training and Development 178 Training Imperatives for the Global Workforce 188 Summary 200 Questions for Opening Scenario Analysis 201 Case 7.1. Training and Retaining Qualified Managers in China 201 Case 7.2. HCN Supervisory Training Needs 202 Recommended Website Resources 204 8. MANAGING INTERNATIONAL ASSIGNMENTS Expatriate Innocence Abroad 205 Introduction 206 Expatriate Preparation, Foreign Assignment, and Repatriation 207 International Assignment Considerations for Special Expatriates 216 New and Flexible International Assignments 223 Summary 229 Questions for Opening Scenario Analysis 229 Case 8.1. Working in a Sheltered Enclave in Shanghai, China 229 Case 8.2. Re-Entry Shock: A Family Affair 230 x CONTENTS Recommended Website Resources 232 Appendix 8.1. Important International Business Travel Considerations 233 9. GLOBAL WORKFORCE PERFORMANCE MANAGEMENT Puzzling Performance Appraisal 239 Introduction 240 Performance Management Process 243 Important Considerations for Global Performance Management 247 Planning and Implementing Global Performance Appraisals 258 Summary 267 Questions for Opening Scenario Analysis 267 Case 9.1. Upstream Performance Management: Culture Shift at Citigroup 268 Case 9.2. Customizing HCN Performance Appraisal Design 269 Recommended Website Resources 270 10. COMPENSATION FOR A GLOBAL WORKFORCE Compensation Convergence 271 Introduction 272 Managing Compensation on a Global Scale: Fundamental Practices 273 Key Compensation Considerations for Expatriates, HCNs, and TCNs 290 Summary 298 Questions for Opening Scenario Analysis 298 Case 10.1. Europe Straining under Pension System Burden 298 Case 10.2. Executive Pay: Increasing the Threat of China’s Wealth Gap 299 Recommended Website Resources 301 11. GLOBAL EMPLOYEE RELATIONS Union Trouble in Korea’s Auto Industry 302 Introduction 303 Current ER Issues 303 Influence of MNCs and Unions on Global ER 310 Summary 330 Questions for Opening Scenario Analysis 330 Case 11.1. At Domino’s, ER Begins with Managers 330 Case 11.2. Age Discrimination in the Workplace 332 Recommended Website Resources 333 Notes 335 Index 385 About the Authors 399 FOREWORD xi Foreword In the past two decades or so, most societies around the world have experienced changes, unparalleled in scale and scope to those encountered in preceding centu- ries. These include the globalization of industries; regional economic integration; the formation of international strategic alliances across firms in different industries and countries; the lowering of immigration and emigration barriers to the movement of people, thus contributing to growing diversity in the workforce; and quantum advances in telecommunications that enable almost instantaneous access to informa- tion and communication at the click of a mouse (Tung 1998a). To cope with these dynamics, organizations have to develop and retain a cadre of globally minded executives who can move with chameleon-like ease from one coun- try to another. The development and retention of this cadre of executives who have perfected the art of acting local worldwide—referred to by some as “corporate diplo- mats” (Saner, Yiu, and Sondergaard 2000)—are not easy. Some companies lose market share and prospective business because their executives are unable to perform effec- tively in other countries. Thus, companies have to recruit and develop such talent. However, even after a company has successfully hired and nurtured this talent, with the emergence of “boundaryless” careers (Tung 1998b), organizations have to work hard to retain these people. Increasingly, highly skilled and qualified employees are willing to leave their country of origin to relocate elsewhere, for career, personal, and/or financial reasons. In other words, in order for a company to survive and thrive in this new calculus of global competition, they have to effectively manage their human resources, including their selection, training and development, compensation and retention. Thus, human resource management has become pivotal to a firm’s global competitiveness because capital and technology cannot be effectively allo- cated nor transferred across international boundaries in the absence of people. This book by Charles Vance and Yongsun Paik seeks to address many of the challenges and opportunities that arise in the context of international human resource management. Drawing upon research findings, the chapters examine how environ- mental and institutional constraints, including culture, impact human resource plan- ning and other human resource functions of international firms. Abundant up-to-date examples from around the world are provided along with short case studies to high- xi xii FOREWORD light the issues presented in the text. A very useful feature of the book is the inclu- sion of relevant websites that readers can access the latest